Britain's ARM targets 10 percent of server chip design market by 2017

TAIPEI | By Michael Gold

TAIPEI Britain's ARM Holdings PLC, whose chip designs feature in most smartphones, has started designing chips for servers with a market share goal of 10 percent in three years, to capitalise on the growing data demands of wearable smart devices.

Technology companies from Google Inc to HTC Corp are investing heavily in wearables such as watches and spectacles, which add to the strain on servers when sending and receiving real-time data.

The value of wearables and other everyday products equipped with ARM-based embedded connectivity is likely to reach $20 billion (£12.08 billion) in 2018 from $14 billion last year, said Vice-Director of Investor Relations Ian Thornton.

In light of that, ARM has started designing chips for servers, and the first chips are scheduled be shipped this year, Thornton said at a news conference in Taipei on Thursday.

ARM aims to control 10 percent of the server chip design market by 2017, Thornton said, taking share from rivals such as industry-leader Intel Corp in the process.

The company is working with Hewlett-Packard Co and Dell Inc to put ARM-designed chips into the servers of two of the leading manufacturers, Thornton said.

ARM licences its designs to chip manufacturers, and chip buyers pay ARM royalties. Thornton said the royalties from server chips could be as much as $10 million by 2017.

"This is a useful extra layer of royalties," Thornton said. "It's a nice adjacent market for us to win share in."

That figure pales in comparison with ARM's royalties from smartphones such as the iPhone and Galaxy ranges from ARM customers Apple Inc and Samsung Electronics Co Ltd.

ARM earns just under half its royalties from smartphones, and last month said falling demand for high-end models led to royalties of $130.4 million in the fourth quarter of last year, slightly below analyst estimates.

Nevertheless, ARM sees robust growth in the overall smartphone and mobile-computing market, with the value of such ARM-based devices growing to $20 billion by 2018 from $13 billion in 2013, Thornton said.